Jobs data help stocks set records

Traders are cheered by stronger hiring and a slightly lower unemployment rate

By Bernard Condon

Associated Press

POSTED: 1:30 a.m. HST, May 4, 2013

ASSOCIATED PRESS

The Dow Jones industrial average crossed 15,000 for the first time Friday, and the Standard and Poor's 500 index, a broader market measure, rose above 1,600. Specialists Devin Cryan, left, and Gabriel Freytes donned celebratory baseball hats as they worked on the floor of the New York Stock Exchange.

NEW YORK » Stocks surged to all-time highs Friday when a surprisingly good jobs report finally gave investors a clear sign of U.S. economic strength after weeks of conflicting signals.

The market jumped from the opening bell, traders donned party hats and a wave of buying helped the Standard and Poor's 500 index close above 1,600 for the first time. The Dow Jones industrial average briefly rose above 15,000, a milestone.

"There's euphoria today," said Stephen Carl, head equity trader at The Williams Capital Group. "That's what you'd have to call it."

On the floor of the New York Stock Exchange, brokers sported baseball caps emblazoned with "Dow 15,000."

Investors are hoping it's more than just a one-day celebration. Jobs are key to keeping stocks climbing. Big U.S. companies are making record profits, but much of that lately has come from cutting costs, not boosting sales. More jobs, and more consumer spending, would help.

The April jobs report was a good start. U.S. employers added 165,000 workers last month and many more in February and March than previously estimated. The unemployment rate fell to the lowest level in four years, 7.5 percent.

The Dow rose 142.38 points to close at a record 14,973.96, up 1 percent. The S&P 500 index climbed 16.83 points, or 1 percent, to 1,614.42, also a record.

"We're breaking through psychological barriers, and that will continue to bring investors off the sidelines," said Darrell Cronk, regional chief investment officer for Wells Fargo Private Bank. He called the jobs news "wonderful."

Cronk, like many others on Wall Street, has been watching individual investors for signs they may finally have shed their fear of stocks. A surge in buying from them would help push stocks higher. But individuals late last month pulled more money out of stock funds than they put in, a reversal from the trend earlier this year, according to the Investment Company Institute.

They've had reasons to pull back lately.

First came news of falling retail sales in March, then a series of weak manufacturing reports and signs of an economic slowdown in China.

Other reports, including two out Friday, have pointed to a slowdown. Factory orders sank in March, and a gauge of growth in the service sector fell short of estimates.

First-quarter earnings have been mixed, too. Though they've come in higher than expected, many companies have reported little or no revenue growth, which has spooked investors.

Investors have also been concerned that higher Social Security payroll taxes and sweeping government spending cuts that took effect earlier this year will slow U.S. economic growth and pinch corporate profits.

On Friday the market's gains were broad. Eight of the 10 industry groups in the S&P 500 index rose. Nearly three stocks rose for every one that fell on the NYSE.

Companies that stand to benefit most from an upturn in the economy led the market. Those that make basic materials and produce oil and gas rose the most in the S&P 500 index.

Utilities, consumer-staple companies and other safe-play stocks trailed the market as investors took on more risk.

Small-company stocks are more risky than bigger companies but can also offer investors greater returns. On Friday they outpaced the broader market.

The Russell 2000 jumped 14.57 points, or 1.6 percent, to 954.42, a new all-time high.

The Nasdaq composite index rose 38.01 points to 3,378.63, an increase of 1.1 percent. Still, it remains well below its dot-com peak.

The S&P 500 is up 13 percent from the start of the year. The Dow is up 14 percent.

DOW MILESTONESThe Dow Jones industrial average broke through 15,000 Friday for the first time but closed at 14,973.96. A look at the previous times that the Dow first closed above round-number levels, measured in increments of 1,000 points.

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palaniwrote:

Good news for some, but not so much for job seekers and savers. As the Fed continues its suppressed interest policy, many are faced with the choice of either allowing their bank accounts to shrink from inflation or investing in riskier assets such as stocks. Although corporate America seems healthy right now, this surge has all the signs of a bubble.

From Ed Morrissey at hotair.com:

The civilian workforce participation rate remained at a 34-year low of 63.3%. However, the number of people not in the workforce declined slightly in the Household data from March by 31,000. It’s still 632,000 higher than in February. Discouraged workers rose by 32,000 and marginally-attached workers rose by 21,000, both of which are relatively narrow shifts.

The drop in the U-3 or nominal unemployment rate to 7.5% is one tenth of a point from March, but four-tenths from January. The U-6 total unemployed rate actually rose a tenth of a point in April to 13.9%, but that’s also a half-percent lower than January.

The 165K jobs growth figure beat expectations across the board — but let’s not turn that into better news than it is. At 165K, the US economy generated slightly more jobs than it needs to keep up with population growth (~150K). The civilian workforce participation rate makes it clear that we’re not putting people back to work — at best, we’re treading water. The revised February numbers are what we need as an average to make a dent in the massive number of people shut out of the jobs market. This is about the average we’ve seen for the recovery....

Still, details of the report remained consistent with a slowdown in economic activity. Construction employment fell for the first time since May, while manufacturing payrolls were flat. The average workweek pulled off a nine-month high, but average hourly earnings rose four cents[.]

Note that average hours worked are dropping, a possible response to Obamacare mandates for those working more than 30 hours per week.

For those alarmed at the growing income gap between the "wealthy" and "working" classes, look no further for an explanation. Artificially low interest rates overwhelmingly favor those fortunate enough to earn passive income from stocks. The disparity trend is directly attributable to the economic policies of the current administration.

on May 4,2013 | 05:25AM

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mikethenovicewrote:

Too long your comment. Us Hawaii people will just fall asleep. Try more short next time! No need showoff your college skills.

on May 4,2013 | 06:41AM

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seriouswrote:

True, keep it short! If one looks at the rise in the market since the Clinton recession in '08, yes it's at a bubble. Historically the market fluctuates no different this time. Buy low, sell high hasn't changed.

on May 4,2013 | 06:49AM

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mikethenovicewrote:

The Republicans need to stop dissing the Democrat's progress just because their GOP Presidential candidate did not win last Nov. Only as a team with both Democrats and Republican holding hands can America win.

on May 4,2013 | 06:43AM

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seriouswrote:

Oh, I agree, but when we have a President who keeps blaming the other party we'll never get cooperation.

on May 4,2013 | 06:51AM

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HD36wrote:

Now you know where all the cheap money from the central bank printing around the world is going.

on May 4,2013 | 09:17AM

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Brixac3wrote:

The figures don't lie. The problem is that liars can figure. Remember, Unemployment CLAIMS have dropped. This is not how Unemployment was reported in the past. By this definition, if you graduate from high school or college and don't get a job, you are not eligible for unemployment, therefore are NOT counted as unemployed. Welfare recipients are at an all time high.
Most people will say that politicians lie, but few discern their lies. Complete blind faith in any politician of any party isn't wise. They all do some good and they all have a self serving agenda. People put too much faith in who they elect. Hold them accountable to what they promise and when they are wrong and when they fail. Don't be fooled, there will be a price to pay for the current fake stimulus economy.

on May 4,2013 | 08:41PM

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Manoa2wrote:

We still have a free market system as far as the stock market goes.
The market is speaking very positively on the economy-- if you think you know better than the market, then become a dictator instead.